4/19/2004 @ 12:00AM

Poison Pills

The new ban on ephedra will protect us from harm, right? Don’t count on it: The same hucksters are still around, pushing the next multibillion-dollar miracles in diet capsules.

Packed into tight jeans and a dark golf shirt, Robert Occhifinto is a picture of defiance. “I am not going to lie down,” says the 42-year-old, twice-convicted felon. He is suing the feds, trying to stave off an all-but-inevitable ban on the ephedra-based diet supplement that has has made him rich. Occhifinto has taken his lumps before, spending 18 months in the slammer for money laundering after selling chemical ephedrine to a guy who turned out to be a maker of methamphetamine and 8 months under house arrest for importing liquid hashish.

But this is war. Last year in the presence of federal agents and the U.S. Marshal’s Service bearing warrants, Occhifinto’s company, NVE Pharmaceuticals, destroyed $4 million to $5 million worth of ephedra products called Yellow Jackets and Black Beauties (which happen to be street names for barbiturates and amphetamines), burying capsules in a landfill near his 25,000-square-foot pill factory in the dairy-farm country around Andover, N.J. The backhoes were there because Sean Riggins, an Illinois teenager and football player, died of a heart attack after using Yellow Jackets made by NVE. Now, despite at least 30 product liability and wrongful death suits, Occhifinto isn’t backing down. Not with $80 million (NVE’s 2003 sales) at stake, most of it from ephedra-based supplements like Stacker 2, Yellow Swarm and Midnight Stallion. Says he: “I am going to fight to continue to manufacture ephedra till the FDA can prove it’s dangerous when used as directed.”

What more proof does he need? The Food & Drug Administration’s ban on ephedra, set for Apr. 12, comes after 16,000 adverse-event reports and a government-commissioned study that linked the adrenaline-like stimulant to heart attack, stroke and death. For years pillmakers argued their products were perfectly safe if used properly. They–and their $18 billion-a-year dietary-supplement industry–were shielded by a 1994 law, the Dietary Supplement Health & Education Act (see box), which permits the government to restrict sales of botanical-based supplements only if it can prove unreasonable public health risks.

Ephedra’s fate changed with the death of Baltimore Oriole pitcher Steven Bechler. The 23-year-old fell ill during spring training in February 2003 and died of complications from heatstroke the next morning, leaving a pregnant wife. Found in his locker was a bottle of Cytodyne Technologies’ ephedra-containing Xenadrine RFA-1. The autopsy showed that ephedra toxicity contributed to his death, leading to congressional hearings last summer. Robert Chinery Jr., the owner of Cytodyne, testified he did not believe Xenadrine contributed to Bechler’s death, citing a report Cytodyne commissioned from New York City’s former chief medical examiner Michael Baden. Baden concluded, said Chinery, that Bechler died of heatstroke precipitated by “morbid obesity, high blood pressure and heart disease.” (Bechler, who was 6-foot-2, weighed 250 pounds, say the Orioles.)

Ban or no, guys like Chinery and Occhifinto are here to stay. Americans want a magic pill to help lose weight without having to eat less and exercise more–and ephedra, for all its health risks, did a moderately good job of it in the short term. Some pill pushers will fight to lift the ban. Others are coming up with new “miracle” (and ephedra-free) capsules, whether laced with green-tea extract or a stimulant known as “bitter orange.” Quite a few supplement makers–ten dominate the $1.7 billion market for weight-loss pill supplements–are replicating their preban setups, armed with powerful sponsors, relentless marketing and questionable claims of efficacy and safety. As yet, the FDA has no inclination to go after them. And they’ve so far largely managed to avoid paying damage claims from customers who allegedly died from ephedra.

Perhaps none more cleverly than Chinery, the 34-year-old founder of Cytodyne, in Manasquan, N.J. Few people benefited more from the ephedra boom than Chinery, who took in at least $165 million in pretax distributions from his company in the last five years, tax records show. At this juncture little, if any, of the loot seems likely to find its way to plaintiffs, even if they’re successful in the dozens of personal injury and wrongful death suits against him. That’s because Chinery, according to creditors, is insulating himself from liability. Last October he pushed the company into bankruptcy, after selling most of its assets to entities in which he is a part owner. (Cytodyne general counsel Shane Freedman says the company was forced to file for bankruptcy protection because losing a lawsuit rendered it insolvent. He “categorically denies” that the bankruptcy and asset sale are part of an elaborate attempt by Chinery to avoid paying liabilities. He also claims Chinery is being victimized by plaintiff attorneys.)

Chinery founded Cytodyne in 1997 just as the ephedra bonanza was exploding. After graduating from high school he worked at his brother’s dietary pill company–which sold an ephedra-and-caffeine combination called Cyberblast–before branching out on his own to sell supplements through a catalog. That became his vehicle to sell Cytodyne’s main product, Xenadrine RFA-1.

With no science background, Chinery came up with the formula for Xenadrine himself. He got help refining his idea from Mel Rich, a registered pharmacist who held the biggest stake in Evergood Products, parent of Phoenix Laboratories in Hicksville, N.Y. Rich had inherited the lab from his father, Sidney, who built Phoenix partly by making generic drugs, but Mel increasingly became involved in supplements. Chinery outsourced production of Xenadrine to Phoenix, which acquired raw materials, weighed and mixed the components and encapsulated the product, charging Cytodyne as little as $4 for a bottle that retailed for $40. Chinery got a big break in 1998 when he persuaded GNC, the big dietary-supplement retailer, to carry his pills. He expanded his advertising from magazines to television. Before he knew it, Xenadrine found its way into Wal-Mart, Target and Eckerd.

Cytodyne, with maybe 11 employees at its peak, coined money. Tax records show its cost of goods sold and ad budget totaled $90 million on revenues of $195 million in 2002, leaving it after some other expenses with $68 million in profits.

Chinery is not the only one who reaped huge profits from diet pills. A federal indictment against Michael Blevins for weapons-related violations (to which he pleaded not guilty) recently revealed affidavits of federal agents in which they allege that he and the two other owners of Metabolife International, Michael Ellis and William Robert Bradley, siphoned millions of dollars in cash from the company to offshore accounts. Metabolife 356 was for years the bestselling ephedra-containing diet pill, generating more than $1 billion in revenue in the five years leading up to the ban.

Part of an Internal Revenue Service investigation, the documents appeared in November, when they were temporarily unsealed in the case against Blevins. They claim that the company failed to account for $94 million in income between 1996 and 1999, when Metabolife 356 was sold through independent distributors who often paid cash. A few days after the documents were unsealed Metabolife’s outside accountant, Michael Compton, committed suicide. The company still faces a Justice Department investigation over whether it made false statements to the FDA regarding the seriousness of adverse-event reports, including seizures and strokes caused by Metabolife 356. (At last summer’s congressional hearings, Ellis pleaded the Fifth.) Metabolife denies, through its lawyer, Stephen Mansfield, any involvement in any illegal conduct, saying the government is chasing inaccurate allegations from disgruntled ex-employees.

Metabolife soldiers on. Its new president is Ron L. Cunningham, a onetime executive of UGG Holdings, a maker of footwear, including the now-famous sheepskin boot. But Ellis and Blevins, both of whom were convicted in connection with a late-1980s conspiracy to manufacture methamphetamine, are still in control. The company has quit making pills laced with ephedra and has a line of green tea, caffeine-free and bitter-orange products.

Bitter orange has become the next big diet thing. Like many of his peers, Chinery has been hawking an ephedra-free replacement, Xenadrine EFX, which includes citrus aurantium, or bitter orange. Citrus aurantium contains synephrine, which, like ephedrine and amphetamine, is a stimulant that mimics adrenaline. Its fans say that synephrine, like ephedra, can, in combination with caffeine, suppress appetite and boost metabolism so the body burns its own fat.

But adrenaline-like compounds that boost metabolism have a habit of also boosting blood pressure and heart rate. “They are adjusting synephrine to the same pharmacological potency so that it will have the same cardiovascular and neurological effects of ephedrine,” says Arthur Grollman, professor of medicine and pharmacology at the State University of New York, Stony Brook. “Without waiting another nine years for people to die, we can predict with great assurance what the toxic effects will be.” Chinery’s new product also throws in hordenine, a stimulant banned by horse racing organizations that deem it a prohibited substance; Cytodyne claims the 2 milligrams of hordenine in each Xenadrine EFX pill is pharmacologically inactive. In February New York Democratic Senator Charles Schumer called bitter orange ephedra’s “kissing cousin” and asked the FDA to ban it, too.

Not likely anytime soon. Since dietary supplement makers don’t have to prove safety, Congress has relied on public studies for facts. In 2002 the National Institutes of Health funded 569 grants worth $171 million for such research. But Paul Coates, director of the NIH’s office of dietary supplements, says his budget is too slim to settle unanswered questions about components in these products. Few researchers are using NIH funds to study bitter orange. One of them is Christine Haller, an assistant professor at the University of California, San Francisco, and a veteran of the ephedra wars. But she is just starting.

The bitter-orange hype machine is running far ahead of credible research. Recent ads for Xenadrine EFX in fitness magazines blare that it has been “clinically tested” to outperform ephedra-based products in “boosting of metabolism and resulting caloric expenditure.” On what is this based? The first claim comes from an abstract of a study submitted to a conference called “Interaction of Physical Activity and Nutrition” in 2002. The abstract details a study of 10 healthy adults–puny compared with a Sanofi-Synthelabo weight loss study with 6,600 subjects. The 10 took servings of Xenadrine EFX and reported that it enhanced metabolism and caused no untoward events. The study was never published in any recognized, peer-reviewed medical journal. The second claim cites another abstract, summarizing a study of six people, published in the Journal of American College of Nutrition in October 2002, which insists Xenadrine EFX did not cause heart rate change but increased metabolism. It ends by saying, “future studies should examine the effects of this dietary supplement over the longer term on body weight.” More than 18 months later the paper on which the abstract rests has not been reviewed by peers or published in a recognized medical journal.

The author of these abstracts is Douglas Kalman, who holds an M.S. from Hunter College in clinical nutrition. He serves as director at Miami Research Associates, which claims to do clinical studies on a range of drugs treating everything from cardiology and gastroenterology to weight loss and women’s health. He also worked for Chinery in the past. That was back in 1999, when Cytodyne retained Peak Wellness, a Greenwich, Conn. medical center run by Carlon Colker, M.D. and author of the Greenwich Diet, to conduct a clinical study on the effectiveness of the ephedra-containing Xenadrine RFA-1. Cytodyne paid Colker about $5,000 per month after the study to field calls from customers and make conference appearances. It was Kalman who conducted the study and published an abstract in Obesity Research Journal inJanuary 2000 that showed subjects who took Xenadrine RFA-1 experienced greater fat loss than those in a placebo group. But the journal refused to publish the research paper after Kalman submitted it (he eventually got it into Therapeutic Research Journal).

That study came in for a special drubbing by a San Diego Superior Court jurist. Ruling in May 2003 on a class action filed against Cytodyne in California alleging the state’s consumers had been defrauded by ads claiming weight-loss benefits from its pills, Judge Ronald Styn said that Chinery “probably encouraged Mr. Kalman to use the numbers that exaggerated the results” of the study and that “it appears that Mr. Kalman went through and picked and chose the data which would give the most favorable results.” Judge Styn found that both Chinery and Colker lacked credibility and ordered Cytodyne to pay $12.5 million to California consumers. In its defense, Cytodyne points out that it is one of the few companies in the industry that bothers to conduct product-specific clinical trials and blames the verdict on California’s lax ad laws. Kalman and Colker, through their attorney, deny ever manipulating data and stand by their research.

The attorney general of New Jersey and several California district attorneys have since sued Cytodyne under state law for false advertising. Cytodyne plans to appeal the California class action and points out that the chairman of the Federal Trade Commission, Timothy Muris, has in the past favorably testified on its ads, “demonstrating the credibility of the advertisements.” Muris was indeed once a paid expert witness for Cytodyne. The FTC, which is charged with protecting consumers from deceptive practices in the market, has filed more than 100 actions challenging the advertised claims of dietary supplements, but agency officials say they do not have the resources to go after all dubious weight-loss products. The FTC has never filed a case against Cytodyne–and refuses to say whether it has investigated the company.

Perhaps the feds think there is no point. The very morning that class-action plaintiffs were preparing last October to freeze Cytodyne’s assets after Judge Styn’s ruling, Chinery thwarted them by filing for Chapter 11. Court records suggest that Chinery had been preparing for such a moment. He had renamed the company Nutraquest and sold nearly all of Cytodyne’s assets, including its accounts receivable and inventory, to two limited liability companies called Everrich and Evermel. The names of those companies would later be changed to Cytodyne and Cytodyne I, both 87.5% owned by Evergood, the parent of Phoenix Labs, controlled by Mel Rich. Chinery has used two additional limited liability companies, court documents show, to hold on to 12.5% of Cytodyne and Cytodyne I. Another entity, which owned the rights to Xenadrine EFX and is controlled by Chinery’s wife, has licensed the marketing rights to Cytodyne in return for royalties. It’s these entities that currently produce, advertise and sell products under the Cytodyne brand, including Xenadrine EFX.

As for Nutraquest, its assets consist only of $2 million in cash and the $12.6 million in notes payable by Cytodyne and Cytodyne I. Meantime, Chinery has told creditors that his plan for Nutraquest’s reorganization rests on new weight-loss pills and “hair support” products. By filing for bankruptcy protection he has also been able to consolidate all 53 personal injury and wrongful death claims into one federal court in New Jersey.

Those claims may soon pile up. There could be “a couple billion dollars worth,” says the bankruptcy judge in charge, including a $600 million suit filed by the widow of pitcher Steven Bechler. Plaintiffs can forget about collecting insurance. The company’s policies only add up to maybe $7 million in coverage, court documents show. “Chinery pulled out millions upon tens of millions from the company, putting it in a position where it couldn’t pay its debts,” says David Noonan, who represents California consumers in the class action. “The transactions are highly suspicious, and we are investigating to see whether they were fraudulent and done to prevent us from collecting on a valid judgment.”

Not so, says the company, which calls the asset sale a fair transaction long in the works to support fast-growing sales. “We had an obligation to file for bankruptcy and treat all of our potential creditors equitably, otherwise the creditors from the California verdict would get everything and other creditors would get nothing,” says Nutraquest lawyer Shane Freedman. “Bob Chinery has absolutely nothing to hide at all and has done nothing wrong.”

Back in New Jersey, NVE’s Occhifinto is making his stand, claiming the FDA’s evidence against ephedra is weak. In a lawsuit that alleges the government is “acting … in excess of the FDA’s statutory jurisdiction,” he is asking a federal court to set aside the ban. But the judge may very well toss out the suit, so Occhifinto is hedging his bets. He recently expanded into 10,000 square feet of new factory space to make protein bars crammed with nothing more harmful than peanut butter and Smucker’s jelly. In addition to his non-ephedra pills, he also plans to offer teas and a “liquid lunch” product. Still, he’d like nothing better than to continue to make Stacker 2. “Ephedra,” he sighs, “that’s the brass ring.”